PRC-1 · Chapter 4 · Question 47 of 100
'Tech Support Inc.' received a Rs. 240,000 cash payment for a 1-year maintenance contract starting on 1 October. Their financial year ends on 31 December. How much of this amount should be transferred to the statement of profit or loss for the year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 60,000
Explanation
The contract spans 12 months. From 1 October to 31 December is 3 months. Therefore, the earned portion transferred to profit or loss is Rs. 240,000 x (3/12) = Rs. 60,000.
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